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TMI Blog2011 (4) TMI 1082X X X X Extracts X X X X X X X X Extracts X X X X ..... on petitions have been filed by the State of Kerala aggrieved by the orders passed by the Kerala Value Added Tax Appellate Tribunal in its order in T. A. (VAT) Nos. 272/2008 and 314/2008. The facts which led to the filing of these revision petitions are that the respondent herein, M/s. Jyothy Laboratories Ltd., a manufacturer and dealer of detergents, whiteners, etc., are also manufacturing and dealing in products known as "Ujala Supreme" and "Ujala Stiff and Shine". In respect of Ujala Supreme, in the returns filed for the year 2005-06, the assessee collected and paid tax on the sales turnover for the month April and May 2005 at 12.5 per cent and for the subsequent period at four per cent only. In so far as Ujala Stiff and Shine is concerned, the product was launched in June 2005 and four per cent tax was collected and paid. The assessing officer issued annexure A notice under section 22(3) of the KVAT Act, on the basis that the aforesaid products of the assessee were laundry brighteners and proposing to classify the products under entry 27 of S. R O. No. 82/2006 tax and levy tax at 12.5 per cent. On receipt of the notice, the assessee filed its objections contending that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, the State of Kerala has filed these revision petitions and the questions of law framed are the following:- O. T. Rev. No. 13/2009 (against TA (VAT No. 272/2008)) "(A) Ought not the Tribunal have held that Ujala Supreme and Ujala Stiff and Shine, manufactured by the assessee, cannot be levied tax as a industrial input under List A of the KVAT Act since the same is a finished product and cannot be used as a raw material or industrial input? (B) Ought not the Tribunal have held that Ujala Supreme is a laundry brightener assessable to tax under entry 27 of S. R. O. No. 82/2006 and Ujala Stiff and Shine is assessable to tax under entry 103 of S. R. O. No. 82/2006? (C) Has not the Tribunal grievously erred in deciding the issue without reference to the definition of 'manufacture' under the KVAT Act and is not the finding of the Tribunal perverse in the facts and circumstances of the case?" O. T. (Rev) No. 16/2009 (against TA (VAT No. 314/2008)) "Is not the order of the Tribunal confirming the order of the first appellate authority deleting the penalty levied by the assessing officer against the provisions of section 22 of the Kerala Value Added Tax Act and is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed by the Commissioner thus (para 3 at pages 46 and 47 in 28 VST):- " ...The Commissioner after considering all the materials furnished by the appellant and after hearing them issued annexure 5 order again clarifying that both the items do not fall under the above-stated entries in the Third Schedule and instead the items would fall under residuary entry 103 of S. R. O. No. 82/2006 taxable at the rate of 12.5 per cent. The only deviation made in annexure 5 order from the earlier order of the Commissioner is that though he found that laundry brighteners are among the items covered by the heading of entry 27 in Notification S. R. O. No. 82/2006, no such item is provided in any of the sub-headings with HSN Code No. The Commissioner therefore held that both the items fall under the residuary entry 103 of S. R. O. No. 82/2006 which provides for rate of tax on items not covered by any of the entries in the list provided in the notification or by any entry of any of the Schedules to the Act. Accordingly the appellant's claim that the items fall under the two entries of the Third Schedule referred to above was turned down by the Commissioner. It is against this order the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and at the most they tint the fabric.' Entry 155 falls under List A of the Third Schedule to the Act covering 'industrial inputs and packing materials'. It is obvious from the group heading of the Schedule that all items given thereunder including acid violet falling under entry 155(8)(d) are essentially industrial inputs. The finding of the Commissioner of Commercial Taxes in the impugned order is that acid violet paste is purchased by the Jyothy Laboratories, a SSI unit, engaged in the manufacture of various products, including Ujala Supreme and the same is used to produce Ujala Supreme. In our view, the finding of the Commissioner is consistent with the appellant's own case that industrial inputs, namely, acid violet paste, is purchased by the Jyothy Laboratories and is converted into final product, namely, 'Ujala Supreme' for use as a fabric whitener. The appellant has produced several orders of the Central Excise Tribunal and Commissioners of Central Excise in support of their contention that there is no manufacture involved for payment of excise duty in the conversion of AVP into Ujala Supreme, which according to the appellant, is extremely diluted form of AVP. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct commodity that it can be said that a new commodity, distinct from the original, has come into being. . .' Applying the above test laid down by the Supreme Court, we are of the view that Ujala Supreme, which is admittedly used as laundry whitener for clothes, cannot be treated as AVP falling under entry 155(8)(d) under List A of the Third Schedule covering 'industrial inputs and packing materials' because Ujala Supreme, the product made can no longer be identified with AVP in any manner and in the conversion process it has lost its property as an industrial input used for dyeing silk and woollen material. Moreover in the process of conversion, there is 99 per cent erosion in the concentration of AVP leaving only an insignificant percentage of the item in water with different properties and different use. In other words, what is done is that an industrial raw material which is used as a dyeing agent for silk and woollen clothes at high temperature is converted into a laundry whitener. Obviously an acid base industrial raw material cannot be used as a laundry w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o rate of tax on Ujala Stiff and Shine. According to the appellant, the item falls under entry 118(5) of List A of the Third Schedule to the Act providing for 'industrial inputs and packing materials'. Admittedly Ujala Stiff and Shine is a laundry item used to impart crispness and shining of clothes. In common parlance it is an agent which is a substitute for starch used for giving stiffness to clothes and is applied after washing the clothes. The appellant's contention is that the item falls under entry 118(5) of the Third Schedule. Group heading of entry 118 provides for the 'plastic granules, plastic powder and master batches'. Sub-entry (5) provides for rate of tax for polymers of vinyl acetate or of other vinyl esters, in primary forms ; other vinyl polymers in primary forms. Annexures 17 and 18 are test reports obtained by the appellant from Shriram Institute for Industrial Research. In annexure 18 the test result of Ujala Stiff and Shine is given as follows:- Sl. No. Tests Results 01. Polymerized vinyl acetate content, % w/w 42.98 02. Water content % w/w 55.80 03. Solid content % w/w 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the only subsequent development relied on by the assessee is the judgment of the Gauhati High Court in W. P. (C) No. 5428/2010, a copy of which has been produced as Annexure 14 to the counter-affidavit. Having considered the judgment of this court in M. P. Agencies' case [2010] 28 VST 44 (Ker) ; [2010] 18 KTR 82 (Ker), we fully agree with the principles laid down by this court and therefore we hold that the conclusions of the Tribunal in its order in TA (VAT) No. 272 of 2008 are erroneous and illegal and is set aside. On this basis, we answer the questions of law in O. T. Rev. No. 13 of 2009 in favour of the revision petitioner, the State of Kerala and against the assessee and restore the order of the first appellate authority. Coming to O. T. Rev. No. 16 of 2009, the revision is filed against the Tribunal's order in T. A. (VAT) No. 314 of 2008 confirming the first appellate authority's order, deleting the penalty imposed on the respondent. The reason stated by both the appellate authorities for such an order, is their concurrent finding that, if there were reasons for levying penalty, the assessing authority should have passed a separate order of penalty. It was also held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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